Europe, Africa need a symbiotic relationship on hydrogen economy

LONDON (ICIS)–Europe and Africa will need to work together to help one another in the development of a hydrogen economy between the two regions, panellists said at the World Hydrogen 2023 Summit & Exhibition organised by the Sustainable Energy Council between 9-11 May.

Monica Swanson, program manager international hydrogen at the Port of Rotterdam, said that “Europe and Africa are complementary now, it is apparent that we need each other.”

Africa has huge potential when it comes to low-cost, low-carbon hydrogen due to its large renewable potential and significant land mass with a low population density.

Exports of renewable ammonia onto the global market in addition to pipelines connecting North Africa with Europe are all potentially on the cards, which seems like a win-win scenario for both Africa and Europe.

However, some barriers remain, with representatives from both sides of the equation explaining what can be done to allow the hydrogen economy to benefit both Africa and Europe.

AFRICAN HYDROGEN FOR AFRICA

A key theme within the discussions around hydrogen in Africa was the development of its own value chain. Akin Ande, CEO at Chert Group and founder of Tekinologi, said that “Africa needs hydrogen for Africa,” indicating that hydrogen production should not solely be considered for export to Europe.

For example, Dumisani Nkala, senior vice president at Sasol Energy, added that hydrogen in Africa could aid decarbonisation of industries such as steel production, mining, and fertilizer production. While Asma Diallo, strategy and development director at Hydroma Inc, said that Africa could boost demand for hydrogen in transport by developing hydrogen buses as well as hydrogen trains, also improving transport availability for communities.

This approach for allowing the hydrogen produced in Africa needs to be met with a strategy to build demand in the region, which will aid in the development of the hydrogen economy if local demand centres can be developed, and offtake agreements signed.

Expanding on the development of industry and transport, Nkala said that “there must be a balance between food security through ammonia [fertilizers] supply to local markets compared to export premiums.”

Food security in Africa was a theme that was mentioned several times during the conference, with the requirement for renewable ammonia to be used in the local farming industry to aid the growth of crops amid increasing infertile land within the continent.

Moreover, Bruh Ayele Terfie, president of Sub-Saharan Africa at Fortescue Future Industries, said that the average fertilizer usage in Africa is 20-22kg/ha compared to the global standard of 100kg/ha.  Hans Vrijenhoef, EVP president elect at the Ammonia Energy Association, noted that stimulating demand in Africa for renewable ammonia in the fertilizer industry was a “no brainer” to increase food production and strengthen food security in the region.

Job creation within local communities in addition to investment in infrastructure were also seen as key in allowing the hydrogen economy to equally benefit both sides of the equation.

AFRICAN INDUSTRIALISATION

Abdessalam Mohammed Saleh, minister of petroleum, mines and energy at the government of Mauritania, said that “energy poverty has kept Africa behind on industrialisation. Hydrogen has the ability to decarbonise domestic industry and give the population access to cheap reliable energy.”

Indeed, Bamidele Adebisi, professor at the African Hydrogen Partnership at Manchester Met University, said “what does Africa want? Africa wants industrialisation” with a shift away from an extractive economy to an industrial economy.

Terfie said that companies should build electrolysers in Africa “if it makes sense” with many critical materials required for electrolysis manufacturing already in Africa, adding that wind turbine blades could be produced in Africa and that governments should fast-track such projects.

Moreover, Africa is on a level playing field when it comes to hydrogen development with the global hydrogen economy yet to fully develop.

Sally Prickett, director hydrogen advisory at Arup, said that “Africa is not behind as everywhere is starting hydrogen now” and that “local supply chains and logistics” such as building electrolysers, solar panels, wind turbines could boost jobs and skills in African communities.

PAN-AFRICAN COOPERATION

Africa is a continent made up of 54 countries which would all have to work together to boost the hydrogen economy.

James Mnyupe, presidential economic advisor at the government of the Republic of Namibia said that the country had to “work together with the rest of Africa to standardise hydrogen” and that “more domestic sharing is required.”

Ande added that an “African regulatory alignment and standard” was essential for the development of the hydrogen economy in the region, with Diallo adding that “what is produced in one place needs to be able to be sold in another.”

A hydrogen standard has been muted by the industry as essential for the hydrogen economy to grow, with a set threshold of emissions for the hydrogen process and a globally accepted methodology in the measurement of said emissions a must to enable global hydrogen trade.

Axel Dombrowski, director of innovation and digitisation at DNV Renewables Certification, said that international standards were required to allow for the production of hydrogen and for supply into both the local economy and the export market.

However, the move for an African hydrogen standard may be as difficult as a global standard with “different countries at different stages”  even though “partner countries can pull others along” said Farhanja Wahabzada, head of the business alliance on green hydrogen at GIZ.

Some countries in Africa (Namibia, Mauritania, South Africa) have large ambitions in regard to hydrogen production and renewable ammonia exports onto the global market, however, some countries are far behind others and require help to catch up.

EUROPEAN INVESTMENT

Alex Hewitt, CEO of CWP Global, said that there is a “concerted effort for investment in Africa” but that it will take both “bravery and courage” to do so as “money is easy to find if the risk is low.”

Ipeleng Selele, group CEO at RRS Trade and Investment, said that financing would be difficult to come by as “the banks are not going to do it” due to the risks involved in such investment.

Saleh said that there is a need to “de-risk investing in Africa,” a sentiment that was echoed by several panellists during the conference.

As to how to achieve that, Hewitt said that “this is where the regulation comes in” with stable legislation, as with other global regions, needing to be in place before large-scale investments are considered.

Selele said that African countries must view “infrastructure as key for distribution” which would have to come from government funding to allow the movement of products.

This does put Africa at a disadvantage to other global regions in terms of both infrastructure and regulation according to Junaid Belo-Osagie, executive director of investment banking at Mizuho.

Belo-Osagie made several recommendations for Africa to attract additional investment from outside amid a lack of sovereign backing available including: attracting sponsors with proven track records to invest, securing offtaker agreements, more sovereign backing, seeking local knowledge, blending finance and, potentially, allowing Africa a “dispensation” from the global hydrogen standard to boost investment.

Mnyupe argued that African governments need to “pass legislation quickly to aid de-risking” with Prickett adding that policy frameworks would attract investment.

ICIS VIEW

In the case of hydrogen, it is clear that African nations and market participants are aiming to avoid a situation where hydrogen is produced on the continent for the sole purpose of export, leaving little development and investment for local communities, as it has been the case with other commodities.

Africa’s position with hydrogen also means that it can not only support economic development, but also aid in decarbonisation goals.

As for Europe, companies need African governments to pass regulation allowing for an investment environment in addition to steps taken to minimise risks with such large infrastructure projects before a final investment decision can be made.

What is clear is that both sides need to change their approach with hydrogen compared to natural gas or oil, for example, so that the relationship can work.

There is no doubt that Africa could be a massive supplier of both renewable hydrogen and renewable ammonia to Europe and other global regions in the coming years, and it could be the region where the realised costs are the lowest.

However, Africa cannot become a leading hydrogen exporter without outside help, and Europe looks the most likely source for the help as it aims to be the main recipient of the hydrogen and ammonia produced there. Nevertheless, the right environment for investment needs to be put in place quickly for both to grasp this opportunity.